Towards Analytic‐deliberative Forms of Risk Governance in the UK? Reflecting on Learning in Radioactive Waste

While participatory forms of risk assessment and management have been the focus of much conceptualisation, experimentation, and evaluation, relatively less effort has gone into understanding how so called ‘analytic‐deliberative’ processes are developing across policy‐for‐real decision contexts. This paper develops a novel typology of citizen‐science interaction as a basis for analysing the nature and extent of recent participatory risk assessment practice in the UK. It draws on the reflections of professional actors operating across the UK environmental risk domain, focusing down on practice in the area of radioactive waste between 1998 and 2003. Compared with past science‐centred approaches, analysis shows an ‘opening up’ of risk decision processes to extended actors, knowledges, and values, with particular importance placed on public involvement in front‐end framing. This is being constrained by a failure to integrate engagement throughout decision processes, the exclusion of publics from assessing/evaluating environmental risks, and the upholding of a strict separation between citizens/science. These patterns of analytic‐deliberative practice — determined by contextual influences, barriers and challenges operating across UK environmental risk issue‐areas — highlight the need for further methodological development and systematic evaluation of relations between processes and outcomes.     

A multi-attribute approach to assess homeland security risk

The United States Department of Homeland Security manages a wide spectrum of risks involving crime, terrorism, accidents, and natural disasters. This paper supports disaster management by identifying which attributes should be used to describe risks comprehensively and assessing the need to incorporate such multiattribute information into risk management processes. Attributes for describing homeland security risks were selected through a literature review. These attributes were then used in a risk assessment of homeland security hazards that informed risk ranking sessions conducted with members of the general public. The results taken together support the use of a range of attributes and perspectives. While aspects of life/health and economic damage were considered most important by both experts and the lay public, other attributes were of widespread importance, including attributes related to dread and uncertainty. These results demonstrate how to present risks in a deliberative risk management process and the importance of doing so using a complete set of attributes to describe the risks.     

Ethical assessment in radioactive waste management: a proposed reflective equilibrium‐based deliberative approach

Radioactive waste management facility siting has often been surrounded by political controversy. By attempting to overcome accusations of technocracy, radioactive waste management organisations are reframing the problem in terms of socio‐technical issues requiring the integrative assessment of complex scientific, political and ethical issues and establishing analytic‐deliberative decision‐making processes involving public and stakeholder involvement. One important aspect of a publicly supportable radioactive waste management strategy is that adequate ethical assessment is incorporated throughout the process. There are, however, certain incompatibilities between pluralistic public and stakeholder‐led engagement processes and the types of ethical justification stemming from normative ethical theory and the input of ethical expertise. An evaluation of previous work on ethics by the UK Committee on Radioactive Waste Management highlights some of the pitfalls of utilising these types of ‘top‐down’ inputs in a primarily ‘bottom‐up’ decision‐making process. This paper then proposes the development of a new approach inspired by John Rawls's concept of ‘reflective equilibrium’, to better bridge the divide between pluralistic analytic‐deliberative decision‐making and ethical assessment.     

Risk communication and citizen engagement: what to expect from dialogue

Despite the last few decades’ devotion to deliberative methods in risk communication, many studies point to how important challenges arise when citizens are engaged in public dialogue. Since the era of enlightenment public dialogue has occupied a position as a normative ideal for political governance. But ideals are social constructions that have a tendency to direct attention away from underlying conflicts. The concept of dialogue is no exception, and exemplified by the Danish solution to dealing with public scepticism in relation to technological controversies, the internationally acclaimed ‘consensus conference’, the paper seeks to offer a better understanding of the contemporary use of the concept of dialogue as well as its ancient roots. The paper argues that behind the aspirations for deliberation lie two opposing models of dialogue. When these two models encounter in deliberative processes, their different presumptions about the role of communication symmetry are likely to appear. This points to how the models hold very different expectations as to the dialogical outcome, thus imposing some fundamental conflicts regarding the political efficacy of citizen engagement as a strategy for bridging the gap between expert and lay attitudes to societal risks.     

The meta‐governance of risk and new technologies: GM crops and mobile telephones

The stylistic shift from government to governance in the regulation of risks associated with new technologies is often portrayed as an attempt to reach a deeper consensus over public controversies and to avoid future risk management failures. Stakeholder involvement in decision‐making through more inclusive and learning styles is seen as increasingly necessary in order to correct the steering deficit of the state, to rebuild trust in state institutions, and to obviate problems caused by uncertainty and different value perspectives in risk assessments. In this paper we scrutinise this model of risk and governance in the light of recent developments in the UK, focusing in particular on the regulation of genetically modified crops and mobile telecommunications technology. We conclude that the shift to governance is best understood in terms of the accommodative response of the state to a number of new challenges: primarily posed by the changing role of the private sector; by pressures on government to engender public trust in the face of shifting social values; and by the related difficulty in taking decisions with confidence and legitimacy. There is a perceived need within government for a more deliberative approach to regulation and standard‐setting, achieved by a creative combination of managed scientific order and the establishment of deliberative cooperative institutions. However the creation of deliberative mechanisms and institutions is not an easy passage, especially if it is accelerated by uncontrollable political events. Indeed, we caution against romantic interpretations of governance as indicating a uniform popular trend towards the democratisation of state decision‐making, despite the very real opportunities for reform that it affords. Rather, we suggest that a more plausible account is provided by seeing governance as a form of adaptive management necessitated by a series of interlocking economic and social changes, and responses to successive risk management crises.     

Determinants of risk behaviour: effects of perceived risks and risk attitude on farmer’s adoption of risk management strategies

The importance of risk perception and risk attitude for understanding individual’s risk behaviour are independently well described in literature, but rarely combined in an integrated approach. In this study, we propose a model assuming the choice to implement certain risk management strategies to be directly driven by both perceptions of risks and risk attitude. Other determinants influence the intention to apply different risk strategies mainly indirectly, mediated by risk perception and risk attitude. This conceptual model is empirically tested, using structural equation modelling, for understanding the intention of farmers to implement different common risk management strategies at their farms. Data are gathered in a survey completed by 500 farmers from the Flanders region in Belgium, investigating attitudes towards farming, perceived past exposure to risk, socio-demographic characteristics, farm size, perceptions of the major sources of farm business risk, risk attitudes and the intention to apply common risk management strategies. Our major findings are: (i) perception of major farm business risks have no significant impact on the intention of applying any of the risk strategies under study, (ii) risk attitude does have a significant impact. Therefore, rather than objective risk faced and the subjective interpretation thereof, it is the general risk attitude that influence intended risk strategies to be implemented. A distinction can be made between farmers willing to take risk, who are more inclined to apply ex-ante risk management strategies and risk averse farmers who are less inclined to implement ex-ante risk management strategies but rather cope with the consequences and diminish their effects ex-post when risks have occurred.     

Confidence,knowledge, and compliance with emergency evacuation

This article considers how risks are responded to through behavioral adaptations and avoidance strategies. We observe that such behavior can become totemistic and have a limited relationship to the risk it ostensibly answers to. Drawing upon examples such as recycling and original data from a study on drink‐spiking avoidance, the article sets out a new concept for discussing and understanding such risk‐related behavior: the ‘risk ritual’. We elaborate upon this concept in the article, identifying a number of tendencies in risk rituals and drawing upon anthropological and sociological work on the nature and uses of ritual. We compare the ‘risk ritual’ to religious and community rituals, exploring the connections between the former and the rain dance, religious ablutions, abstinence from eating meat on a Friday, and rite of passage ceremonies. Influenced by the cultural approach to risk, we argue that risk rituals, like rituals more generally, are shaped by social conditions, currents, and processes, such as the emphasis on personal responsibility for risk management and the desire to mark out the ‘sacred’ and the ‘profane’. The article concludes that ritualistic risk behavior is better viewed as functional rather than irrational.     

Europe's precautionary principle: promise and pitfalls

The European Union, through a recent 'Communication' from the Commission, has sought to legitimize the precautionary principle while establishing criteria for adoption of appropriate precautionary measures. Although the precautionary principle is not new and indeed reflects a basic human instinct, this article argues that the EC makes a constructive contribution towards formalizing it by describing the principle in the context of established processes of risk analysis: objective scientific evaluation, risk assessment, risk management and risk communication. The EC's reference to a broad spectrum of precautionary measures, subject to specific managerial criteria, also offers some assurance that the principle shall be implemented through thoughtful processes of decision making. There are pitfalls in the EC approach that should be rectified in future refinements of the principle. Critical terms need to be defined, the evidentiary hurdles for precaution need to be clarified, and checks and balances against ill-considered application of the principle need to be strengthened. A systematic process of ranking hazards and targeting cost-effective protection opportunities should be implemented by the EC as a counterweight to enactment of precautionary measures on a crisis-by-crisis basis.     

The Role of Risk in Corporate Value: A Case Study of the ABB Asbestos Litigation

The need for fair risk communication has emerged as a result of a more global and more flexible economy as well as of a media dominated world. Proper risk management and risk communication is therefore crucial today. The paper discusses the need for open and direct communication with the public in order to establish trust and to maintain market value. The case discussed is that of ABB (Asea Brown Boveri) asbestos litigation and the dramatic consequences it had for the company. During 2001 and 2002, the ABB share price fell by roughly 90 percent. The present study indicates that more than 50 percent of the fall was related to asbestos reporting by the media and ABB, primarily during the second half of 2002. The need for further understanding of and procedures for dealing with risks and risk communication in a business context is stressed. The outcome for ABB could have been different if more precise and defined ways of working with and communicating risks had been employed. Due to the asbestos crisis and the dramatic fall in ABB share price, ABB has implemented more structured operational risk management tools and displays a more outspoken awareness of environmental and social risk factors. This new strategy has emerged mainly as a result of an increased work with sustainability issues and a shift from a consensual/technocratic risk approach to a more deliberative mode of risk management.     

Risk assessment for public–private partnership projects: using a fuzzy analytic hierarchical process method and expert opinion in China

Public–private partnerships (PPP) have been widely used in China to procure public facilities and services. Complicated problems in PPP projects in China arise because of a variety of risk factors. A proper risk assessment model is needed to identify risks and provide risk response strategies for future Chinese PPP projects. The fuzzy analytic hierarchy process (F-AHP) method provides the ability to solve complex risk assessment of PPP projects. Current risk assessment models are limited to PPP projects in specific countries and do not consider unique risks in China, especially political, economic, social, and legal risks. This paper designed a risk evaluation index system for PPP projects based on the Delphi expert investigation method, and then established an optimized risk evaluation model for PPP projects in China using the F-AHP method. The risks identified are confirmed by interviewing experts from Chinese local government departments, private enterprise, third-party intermediary consulting and regulatory agencies, and academic organizations. The results show that the risks that ranked among the top ten are closely related to China’s political and economic policies and relationships among stakeholders. It can be concluded that government authorities play a critical role in providing a favorable political, social, and economic environment and an effective institutional framework for PPP projects. Furthermore, it is also important to deal with relationships among stakeholders based on the public–private ‘win–win’ principle. This study provides risk response strategies, addressing key issues from eight aspects: an impeccable legal and regulatory framework; a central coordinating and regulating PPP authority; supportive governmental authorities; institutional capacity-building; favorable economic conditions and viability; community, partner, and moral accountability; clear division of responsibilities through contracts; and effective advisory management. These effective measures may be useful in reducing the adverse effects of risk for PPP projects in China.     

Choosing between precautions for nanoparticles in the workplace: complementing the precautionary principle with caring

Workers who develop and use nanoparticles are on the front line of exposure to the purported risks of nanoparticles. Employers have a legal duty to protect their employees against any work-related harm. However, it is difficult to perform the required risk assessment and management when dealing with uncertainty. Risk ethicists have therefore argued for using the precautionary principle to guide such decisions on uncertain risks. In this paper, I argue that if we want to make use of innovative products, such as nanomaterials, but lack the knowledge and shared standards for choosing between protective measures, the precautionary principle is underdetermined. For the use of nanoparticles in working environments, there are several guidelines that suggest different precautionary strategies for dealing with their purported risks, but choosing between these guidelines proves difficult in the absence of a clear, scientific, decision principle. I therefore explore the ethics of care to develop a complementary decision criterion for the precautionary principle. From this perspective, the caring qualities of working relationships are key in comparing precautions with each other. I propose three conditions for assessing risk management strategies based on (1) the existence of a mutual concern for employee health and safety, (2) the connectedness and continuity of the relationships between employer and employee, and (3) the responsiveness of employers to employee needs. Using these criteria will support choosing between precautions, by shifting attention from the acceptability of imposing a risk to creating a social context in which the imposition of the residual risks can be considered acceptable.     

关于建立企业风险管理体系的思考

随着经济全球化的高速发展,当今的企业面临着前所未有的来自于风险管理的挑战,因此构建适合我国企业的风险管理体系已成为我国企业管理发展的新趋势。文章在阐述企业风险管理内涵的基础上,提出构建具有中国特色的企业风险管理体系策略。     

Global environmental risks: between political hazards and policy decisions

Environmental risks are both decision forcing situations and action forcing events. Rethinking the nature, scientific soundness and democratic character of environmental policy decisions have become critical political issues. And, although the environmental policy approach to address environmental risks enjoys ample support, the newly acquired custody has not been assumed without a degree of political hazard. It is this subject matter which circumvents the analysis of the risk political model, which Munch characterizes as a contingency of double political risks. Since environmental policy inaction is not an option, my interest here is simultaneously with a workable and legitimate model of reaching decisions driven by demands that set explicit goals, acceptable to concerned parties, implementable by policies, with positive impact on the protection against environmental risks. Filtered through the medium of deliberation, environmental risk protection is likely to gain public support and grow into a collective project, thus possibly offsetting the contingency of political hazards. A democratic model of deliberation, however, must be tested not simply by its formal procedural attributes, but also by its ability to deliver. Hence a deliberate model without explicit time frameworks will not do. Any deliberative process preoccupied with environmental risks must seriously consider the pragmatics of time . This implies stipulations of time limits per decision units. After all, time frameworks are embedded within the structuring of rules and decision-making processes, and as such, time has been transformed into both a scarce and a non-renewable resource. This is the more relevant in the context of environmental policy as the intensification of decision-making has been exacerbated in the process of globalization where scientific, technological and economic developments have generated a host of global environmental problems increasingly difficult to address in any decisive form.     

Market liquidity,closeout procedures and initial margin for CCPs*

ABSTRACT

Closeout procedures enable central counterparties (CCPs) to respond to events that challenge the continuity of their normal operations, most frequently triggered by the default of one or more clearing members. The procedures typically entail three main phases: splitting, hedging, and liquidation. Together, these ensure the regularity of the settlement process through the prudent and orderly liquidation of the defaulters’ portfolios. Traditional approaches to CCPs’ margin requirements typically assume a simple closeout profile, not accounting for the ‘real life’ constraints embedded in the management of a default. The paper proposes an approach to assess how distinct closeout strategies may expose a CCP to different sets of risks and costs taking into account real-life frictions. The proposed approach enables the evaluation of a full spectrum of hedging strategies and the assessment of the trade-offs between the risk-reducing benefits of hedging and the transaction costs associated with it. Using an unexplored set of transactional level data, the proposed framework is evaluated assuming the hypothetical default of a real CCP clearing member. We consider the worst-case loss of a large interest rate swap portfolio observed over the past 10 years (i.e. 2005–2015) and show that an efficient hedging strategy which minimises risk may not be optimal when transaction costs are taken into account. The empirical analysis suggests that transaction costs are a significant factor and should be accounted for when designing a hedging strategy. Specifically, it is shown that the risk-reducing benefits arising from more tailored hedging strategies may introduce higher transaction costs, and therefore may change the effectiveness of the strategies.     

Embodied uncertainty: living with complexity and natural hazards

In this paper, we examine the concept of embodied uncertainty by exploring multiple dimensions of uncertainty in the context of risks associated with extreme natural hazards. We highlight a need for greater recognition, particularly by disaster management and response agencies, of uncertainty as a subjective experience for those living at risk. Embodied uncertainty is distinguished from objective uncertainty by the nature of its internalisation at the individual level, where it is subjective, felt and directly experienced. This approach provides a conceptual pathway that sharpens knowledge of the processes that shape how individuals and communities interpret and contextualise risk. The ways in which individual characteristics, social identities and lived experiences shape interpretations of risk are explored by considering embodied uncertainty in four contexts: social identities and trauma, the co-production of knowledge, institutional structures and policy and long-term lived experiences. We conclude by outlining the opportunities that this approach presents, and provide recommendations for further research on how the concept of embodied uncertainty can aid decision-making and the management of risks in the context of extreme natural hazards.     

Towards a fair procedure for risk management

The need for fairness in risk management is frequently expressed in the risk literature. In this article, fairness is connected to the procedure for decision‐making. Two models for procedural justice in the management of risks are discussed, one that focuses on a hypothetical thought experiment, and one that focuses on actual dialogue. The hypothetical approach takes John Rawls’ theory of justice as a starting point. The actual inclusion approach employs Iris Marion Young’s theory of inclusive deliberative democracy. With Rawls’ theory, important issues concerning risk distribution are emphasized, and a parallel between social primary goods and risk management is drawn. The hypothetical reasoning should mainly serve as a guide concerning risk issues that affect people who cannot be included in the decision procedure, such as future generations. However, when the affected can be included, an interactive dialogical reasoning is to be preferred. Here, Young’s theory is fruitful. It aims at fair decisions by fulfilling conditions of inclusiveness, equality, reasonableness and publicity.     

Good decisions,bad decisions: the interaction of process and outcome in evaluations of decision quality

Process‐based considerations are generally accepted by experts and analysts as being the fundamental drivers of decision quality. However, little work has been done to account for the role of a risk management decision’s outcome as a key driver of the public judgments about decision quality. To this end, the objective of the research reported here was straightforward to determine – via an experiment – the relative importance of decision‐making process and the associated outcome in lay evaluations of decision quality. Our results demonstrate that people seem to have a difficult time unpacking decision‐making processes, even ones they strongly prefer, from their associated outcomes when evaluating decision quality. From a practical standpoint, our results cast doubt on the generally accepted belief that participatory and deliberative decision‐making processes (e.g., for risk management) will – on their own – contribute to positive evaluations of decision quality.     

An application of data envelopment analysis to the evaluation of audit risk: a reinterpretation

This paper, which reinterprets previous work by Bradbury and Rouse (2002 ), addresses the risk quantification issue at an intuitive level. The insights provided by such quantification are discussed. Risk factors are associated with the risk-return concept. This allows measuring whether risks taken on are appropriately rewarded. The paper gives a non-technical exposition of DEA and outlines possible applications to accounting and finance. Using data for a large multinational, it shows how DEA analysis can be combined with internal audit procedures. It explains how the results obtained can be used to improve risk management.     

Implicit Options in Life Insurance: Valuation and Risk Management

Participating life insurance contracts typically contain various types of implicit options. These implicit options can be very valuable and can thus represent a significant risk to insurance companies if they practice insufficient risk management. Options become especially risky through interaction with other options included in the contracts, which makes their evaluation even more complex. This article provides a comprehensive overview and classification of implicit options in participating life insurance contracts and discusses the relevant literature. It points out the potential problems particularly associated with the valuation of rights to early exercise due to policyholder exercise behavior. The risk potential of the interaction of implicit options is illustrated with numerical examples by means of a life insurance contract that includes common implicit options, i.e., a guaranteed interest rate, stochastic annual surplus participation, and paid-up and resumption options. Valuation is conducted using risk-neutral valuation, a concept that implicitly assumes the implementation of risk management measures such as hedging strategies.     

Optimal hedge ratios and alternative hedging strategies in the presence of cointegrated time-varying risks

This paper utilizes the inter-temporal relationship between the FTSE-100 stock index and its futures price level between 1992 and 1999 to examine the characteristics of several minimum variance hedge ratios and the performances of several alternative hedging strategies for dynamic portfolio management in the presence of cointegrated time-varying risks. Earlier studies neglected the importance of cointegration between the two variables which resulted in biased estimates. These studies, in general, also assume that the hedging period is the same as the estimation time interval. This paper also looks at several key issues when the holding period is longer than the estimation period, such as the construction of optimal minimum variance hedge ratios, and the trade-off between transaction costs and risk reduction.